A letter of credit refers to a written guarantee document issued by the issuing bank to the beneficiary at the request of the applicant (buyer) and in accordance with its instructions, which contains a certain amount of money and is paid within a certain period of time against the compliant documents.
Letter of credit is currently the most commonly used payment method in international trade. The letter of credit can be said to be an S/C guaranteed by the bank for payment. As long as you follow the matters in this contract one by one, you must pay the money by providing the corresponding documents to the bank. In theory, a letter of credit is a very safe payment method. However, in practice, letters of credit are sometimes not so secure, and there may be soft terms that are difficult for you to do, resulting in artificial discrepancies.

Telegraphic transfer (T/T) is a remittance method in which the remitter instructs the remittance bank to pay a certain amount to the recipient of the inward bank by telegram or telex. There are two types: Front T/T and Back T/T.
The first T/T means that after the contract is signed, a part of the deposit is paid first, usually 30%. After the production is completed, the payment is notified, the balance is paid, and then the goods are shipped and a full set of documents are delivered. However, the former T/T is relatively rare, and it appears more in European and American countries.
After T/T receives the deposit, arranges production and shipment, the customer will pay the balance after receiving the copy of the documents; the seller will send a full set of documents after receiving the balance.

Comparison of T/T and L/C

(1). T/T is simpler to operate and more flexible than L/C. Such as tight delivery time, changing packaging, etc., as long as the customer agrees, it doesn't matter. If it is a letter of credit, it is quite troublesome, and the letter of credit must be modified, otherwise discrepancy will be caused, and the customer can refuse to pay.
(2). Another feature of T/T is that the cost is lower than that of L/C. Bank deductions are relatively small, usually tens of dollars. The letter of credit can sometimes be as much as several hundred dollars. Therefore, some factories offer a lower price for T/T than for L/C. However, generally speaking, if the documents are well done, the letter of credit is more reliable than T/T, and the collection is guaranteed by the bank. With the letter of credit, you can go to the bank to package the loan, and the financial pressure is very small. But the bank credit is not good, or the country with strict foreign exchange control, the letter of credit is very risky, such as India.

D/P is a method of delivering documents under the documentary collection method, which means that the exporter's presentation is conditional on the importer's payment, that is, the importer can collect the documents from the bank only after payment. It is divided into D/P Document at Sight and D/A Document Against Acceptance.
D/P Document against Payment means that the exporter issues a demand draft, and the collecting bank prompts the importer. The importer must pay after seeing the bill. When the payment is paid, the importer obtains the shipping documents.

D/A Documents against Acceptance is a method in which the exporter (or the collecting bank) delivers the documents to the importer on the condition of acceptance under the documentary collection method. This settlement method is risky for exporters.